Startups · Entrepreneurship

Whats more important than time and capital in a startup?

Todd Outten Content, commerce and technology.

March 21st, 2016

I often hear entrepreneurs say that a lot of tech startups fail due to of lack of capital.

I have a different view. I believe that a lot of tech startups fail because of inefficient use of time.

I realize that (a) time and money have a strong, 1st level relationship and (b) capital often buys a startup time or "runway". However, in my experience the chief enemy of a startup is wasting time on activities that don't validate the idea, business, or concept sufficiently to raise capital.

My experiential albeit anecdotal evidence for this is the post-mortem conversations I have with myself, my teams, and other entrepreneurs at the end of a venture. These discussions are often a long list of sentences structured like this:

I cannot believe how much time we wasted on ...

  • Talking, thinking & debating while not doing and executing
  • Design, layout, logo, branding, etc. that looked cool but no one saw
  • Business modeling and Excel spreadsheet manipulation
  • Travel
  • Hunting down and pitching investors without anything "real" to talk about
  • Native mobile app development
  • Managing a bad hire

Each of the above wastes time and cuts into the little bit of "runway" a startup has.

Startups need time to get validated learnings that answer a couple of basic questions, e.g. Is there a business here, and if so, what are its characteristics?

Time is needed to:

  • Develop and get something to market to test
  • Run a series of experiments
  • Learn & fail
  • Uncover, refine & eliminate assumptions
  • Discover, test and validate the market
  • Uncover opportunities not present in the business plan
  • Raise capital

Raising capital is tough; however, capital exists and you can add more to your startup if you have good evidence to backup your story.

Time, on the other hand, just passes by, marches forward and doesn't come back.

Be efficient and effective with whatever time your startup has.

Paul O'Brien MediaTech Ventures CEO

March 21st, 2016

Great observations but I'd push you even further: Team team team.  First, last, and only thing of value.  

You even said it, "the chief enemy of a startup is wasting time on activities that don't validate the idea, business, or concept sufficiently to raise capital."  The time wasted is the symptom of a cause: People

Startups don't fail because of a lack of capital they have a lack of capital because they are failing.  The reason you most frequently hear that they ran out of capital is that very few founders are going to acknowledge themselves as the reason for the failure; they defer to a symptom of what happened, running out of money, not the cause.

Capital funds and is used efficiently by the team.  Time is allocated among your team.  Startups fail because of the wrong team resulting in insufficient, poorly managed, or misappropriated capital and time.

Consider the discussions you explore:

  • Talking, thinking & debating while not doing and executing - wrong people or lack of experience executing.
  • Design, layout, logo, branding, etc. that looked cool but no one saw - lack of marketing
  • Business modeling and Excel spreadsheet manipulation - Usually a CEO lacking the COO/CFO experience to know what/how to model and when enough is enough
  • Travel - Right people having the right conversations makes travel irrelevant until it delivers measurable results
  • Hunting down and pitching investors without anything "real" to talk about - The right people are worth talking about.   Investors don't just fund a revenue generating lean startup; they fund the people who can succeed.
  • Native mobile app development - The right technical co-founder and engineers (or advisors) who know if this should be built in house and how, or outsourced
  • Managing a bad hire - team.

Of what you need time for, I'd argue it's more important to get the right advisor/consultant/hire on the team who can accelerate these learnings for you.  "Learn & Fail" does not mean test things that have already been tested or learn things that people already know.  99.9999% of the startups I've watched fail failed because of a team insufficient to the task and an ignorance of or unwillingness on the part of the founders to invest in the right team.

Cheree Warrick

March 21st, 2016

Todd, I agree with you 1000%. So many entrepreneurs waste time asking for money before they've built a prototype and see if anyone will buy (or wants) the item. Great observations.

Stefan Pagacik Innovation Catalyst | Impact Platform Development, Finance and Human Capital Advancement

March 23rd, 2016

There is a saying in the VC community; an "A" level team can take a "C" idea and make it a successful company but a "C"  level team can take an "A" level idea and completely destroy any chance for success. I've seen it happen too many times in my career.

At the end of the day, you have to have something (product or service) that eliminates a pain point for customers willing to pay you TODAY and not a year from now or three years from today. You also have to be able to tell a story about your solution that engages and gains commitment from your team, your customers, your investors, your partners and anyone else who can help you build your venture. I agree wholeheartedly with Todd about wasting time chasing unnecessary tasks. Without the above however, it doesn't really matter how effective you are in managing your time.

Chris Taylor Director, Channel Marketing at Yuneec USA, Inc.

March 21st, 2016

Excellent discussion. Nothing really matters until you find out if what you are building really has a value proposition that your target market(s) care about and are willing to pay for.

Alan Richard Principal at Endoxa.SP

March 25th, 2016

What's more important than time and money is the right product that customers want.

David A. Hall AR/VR ✦ Education 4.0 ✦ Taiwan ✦ Industry 4.0 ✦ Human 2.0 ✦ Social Enterprise ✦ Speaker ✦

March 30th, 2016

I ask my startups constantly why do you want to raise VC money? Why do you need an Angel? Why do you want to go IPO? ( I don't know. I like to say it and thought it sounded cool :) They have heard these terms so often that they think it is the only route and have no idea what their true purpose is in pursuing these avenues. I tell them you don't need the money. There are millions of free resources available for startups and small business (even big data analysis tools for free). Put in your time (learn to flair and focus/say no to everything unrelated to your goal), create and get out there and talk to customers face to face and find out their true pain. Have purpose and meaning and the money will follow. When you need the money, it won't be there. When you don't need it, they will be banging down the doors to give it to you.

Neil HereWeAre Want To find-close Business Online without competition Before They Google Search? We solve this problem 1(508)-481-8567

March 24th, 2016

Discuss// Whats more important than time and capital in a startup?

What's more important than time and capital in a startup?

Vetting,validating the opportunity, if it's really a great one & what it will take to get it successful before you take step 1 and initiate going forward is a lot more important than time and capital

Startups forget to do the following upfront and because they do, they fail regardless of time and capital thrown at the startup:

A) Nothing in their pre-business launch exploratory other than checking with friends and colleagues most of whom have no buying power is present or was done that actually deeply and honestly analyzed
--who were the natural target markets
--what really are the markets issues that if solved were truly natural prospects for their "product"
--revealed an understanding of the issues each natural target audience faced and its resulting adverse "cost"
--understood if their idea had a real market and one that was on a large enough scale and if properly approached would say "Hey that's me! I need that product, service, software, solution to solve my x issues so I can gain a better ROI, faster production, competitive edge, leaner operating, etc. I need to call these guys now"

B) They said in justifying their reason for starting up that
--"there are x gazillion global prospects who because of their industry they were in and or the way they do business could use the solution."
--"If we get just 3%, we are golden" and the dove right in with development, maybe even production for that "giant" market opportunity to get their 3% share

C) They forgot to dig deeper, reveal what actual portion of that giant number they actually might logically fit into and then how exactly to ID the people to contact, how to approach them, what to say that could get powerful receptivity and how to define/implement a great acquiring paying customers approach to get those real opportunities as customers.

Thats why they cannot gain traction and why so many startups fail.

Jackson Powell UI/UX Designer & Front End Developer

March 26th, 2016

I side with this article that states the most important thing to do is not raising money; it's first figuring out how your business makes money and then make some.

Steven Kingsley Principal Partner, Hashema Int'l Partners, HIP Brands, HIP Gastroplex, Newmedia Publishing

March 24th, 2016

Ability to execute well.

Mark Neild Empowering quietly creative people to prosper through innovative yet authentic and engaging business models

March 21st, 2016

Why do startups waste so much time?
2 reasons.  Firstly because they go down a lot of blind alleys.  Well that is the nature of discovery.  It cannot be prevented, but it can be minimised with a proper process.  Secondly and probably most of all because they are not thinking about their business model enough.  As Prof Steve Blank so eloquently put it, the primary purpose of a start up is to discover a business model.  To put it another way they need to design a series of experiments that find the best way to monetise the vision of the founders.
People need to write down their purpose in bold letters and post it somewhere really visible.  Checking whether each and every activity meets their purpose would save a huge amount of time.  Business Models are massively misunderstood and their true power rarely appreciated.